The controversy regarding poverty in America has come to the forefront of the political debate due to the recent rioting in Milwaukee. While some claim the issue is due to the tension between the police and the residents of the poor neighborhoods, others claim that the tension is only a symptom of decades of failed policies in the inner cities. Can our ongoing research with wealthy households reveal some factors that may be helpful in identifying potential factors that might be considered when creating future social policies?
First, we should be clear that we are not advocating that people can only be happy if they have an abundance of money. But having a solid source of income to support even a modest standard of living may rely on some of the same factors that have propelled many to higher levels of wealth.
First, most Millionaires and Mass Affluent investors were not born into wealthy households. In fact, most of our research indicates that the majority of today's Millionaires were not born to wealth. Almost all indicate that they are wealthier than their parents and wealthier than the parents of their spouse. Until recently, Spectrem's research indicated that fewer than 10 percent of Millionaires inherited their wealth. In recent years, however, the number of wealthy households who have inherited wealth has increased due to the generational transfer of wealth from WWII households to Baby Boomers and younger generations. Our most recent research indicates about 28 percent of households have inherited some of their wealth. The American Dream is alive and well for many of these investors.
But inheriting wealth is not a solution for solving the problems of the inner city. What are some of the other key factors involved in creating wealth?
Education is a common factor among Millionaire and Mass Affluent households. Overall, 100 percent of households with more than $100,000 of net worth have a high school education. More than 70 percent have a college education with that percentage increasing as net worth increases. Not only do these households have a college degree, 41 percent of Millionaires and 32 percent of Mass Affluent investors have a graduate or professional degree.
Arguably, many of these individuals may have received some support while pursuing their education. Yet, speaking to many of these individuals through qualitative research reflects that many had student loans and worked during college. While criticism of educational policies is rampant in the political discourse, it's not clear if the simple value of how important it is to receive a degree is clearly communicated. Furthermore, many individuals are never taught that college is within their reach via many of the financial aid opportunities available to them. Granted, there is arguably a discussion about whether taking on student loan debt is worth it long term, however, our research would validate the justification for the debt.
When we ask wealthy households about the key factors contributing to their success, the first answer is always Hard Work and the second is generally their Education. (This is particularly true for professionals such as doctors and lawyers.). Creating social policies that emphasize these key elements is critical. While many of these fundamental goals may be part of the initial formation of a policy, sometimes they get lost as the policy moves forward through implementation.
How does one define Hard Work? The answer varies. For most, however, it has been defined for them through their extended family values. The first thing many Millionaires will bring up when asked about their success is the values they were taught by their parents and grandparents. Hard Work is one of the core values. Thus, the importance of the extended family is often part of the dialogue with Millionaires.
Seventy-nine percent of Millionaires and 72 percent of Mass Affluent investors are married. For the most part it can be assumed they currently live in a somewhat stable familial environment. This is one of the unfortunate challenges of many households today. Single parent homes struggle to provide a stable home environment for children. Finding a way to stabilize the family may be a key part of successful social policy.
It's time for legislators in both parties to sit back and identify whether the programs they are creating and supporting actually incent the habits and actions that have provided success for Millionaire and middle class families. While many of these goals may seem out of reach today, by figuring out how to change some of the factors that impact these core values, we may be able to move more households out of poverty and into the middle class...or even the Millionaire class.